Illegal cigarette trade costing SA billions

The study, commissioned by the Tobacco Institute of SA (Tisa), highlighted that illegal cigarettes were sold for as little as R5 a pack and were available at more than 100000 shops across the country. File photo.

Durban - A total of R8 billion has been lost to illegal cigarette companies which aggressively grew their distribution and sales in the last three months.

According to #TakeBackTheTax campaign spokesperson, Yusuf Abramjee, the research is “a terrible indictment on the SA Revenue Service (SARS)”.

Abramjee said the new IPSOS report, released on Tuesday shows that illegal cigarettes have now captured over 42% of the South African informal trade and are available in three out of every four shops in the country.

“I am shocked by rapid growth in the illegal cigarette crisis, especially after a promised crackdown by SARS. We now have a situation where the biggest selling brand in South Africa, RG, is an illegal brand. That has, apparently, never happened before in any country in the world,” Abramjee said.

He said SARS’s failure to act against tax dodging manufacturers has now cost the country yet another billion Rand, with lost tax revenue going from R7bn to a massive R8bn.

“This is unacceptable and our biggest worry is that this figure will continue to rise even further - hitting the R10 billion mark, if SARS continues to turn a blind eye to this illegality,” he said.

Abramjee called on SARS to stop playing games with this issue and to actually start acting, as promised.

“If this is a SARS crackdown then the multi-billionaire bosses of the illegal companies must be rolling on the floor laughing,” Abramjee said.

Last week, the Lesotho Revenue Authority (LRA) officially announced that RG, South Africa’s biggest cigarette brand, is an illegal cigarette because it is not paying taxes. It is being smuggled in huge quantities into Lesotho and earlier this month the LRA seized RGs 380,000 on their way into Lesotho from South Africa. This was the largest single seizure of the past five years.

“Why is it left to the Lesotho Revenue Authority to take a stand against this fraud and tax evasion in South Africa. Where is our own SA Revenue Service, and why are they not doing anything? There is an added worry around small traders who are now at risk since illegal cigarettes are liable to seizure by SARS,” he said.

According to Abramjee, these massive companies, taking in billions of Rands in illegal profits, right under the nose of our law enforcement authorities are getting away scot-free while small traders take all the risk of seizure and closure for selling illegal cigarettes.

He said #TakeBackTheTax welcomes the move by some retailers who are now taking action.

“Supermarket chain, SPAR has bravely decided to remove all illegal cigarettes from their shelves until their makers start paying their taxes. This is excellent news, and we call on all other supermarkets and retail stores selling fake cigarettes to be good corporate citizens and desist from doing so immediately” Abramjee said.

He said even the Nugent Commission of Inquiry said that there is no more time to waste - it is high time for SARS to wake up and take the fight to the tobacco companies themselves.

#TakeBackTheTax is committed to continuing with this campaign.

Over 22 000 members of the public have already signed a petition calling on authorities to act now and reclaim the billions of Rands in lost tax revenue.